On 24 June 2023, further EU sanctions against Russia came into effect. In addition to new anti-circumvention tools, the 11th sanctions package includes a number of significant new measures relevant for Danish companies, such as new import and export restrictions, addition of further individuals and entities to the asset freeze list (effective as of 23 June), expansion of the transit ban on certain goods and technology through Russian territory and extended prohibitions on the transport of goods into the EU by road and access to EU ports. It is also worth noting that the deadline for EU operators to obtain a license to divest their Russian subsidiaries has been extended. In this newsletter we have included an overview of the most significant measures.
The new sanctions package entered into force on 23 and 24 June 2023, respectively. The measures are set out in three different regulations accessible here, here and here.
Below, we outline a selection of key changes to be noted by Danish companies to ensure continued compliance with EU sanctions against Russia.
New anti-circumvention tool
Regulation 2023/12141 (amending Regulation 833/2014) introduces a new anti-circumvention tool that will allow the EU to restrict the sale, supply, transfer or export of specified sanctioned goods and technology to certain third countries whose jurisdictions are considered to be at continued and particularly high risk of circumvention.
By adding third countries to annex XXXIII of the regulation, the restrictions on specified sanctioned goods and technology will be imposed on the respective country. The tool has been added as a "last resort measure"2 and currently no countries are listed in Annex XXXIII.
The new anti-circumvention tool works in steps. Firstly, the EU may adopt individual measures against specific third-country operators. Secondly, after the introduction of such individual measures, the EU will engage in dialogue with the country of the operator targeted by individual measures. Following this, if the EU finds that there is continued circumvention of sanctions despite dialogue and individual measures, the EU will have the option of placing the relevant third country on the Annex XXXIII list.
Exit from Russia
The regulation extends the deadline to 31 December 2023 for EU companies to obtain a license from their national sanctions authorities to exit businesses in Russia holding certain controlled goods and technologies.
Expanded transit ban
Regulation 2023/1214 expands the existing transit ban on certain goods transported via the territory of Russia in order to tighten anti-circumvention measures. Specifically, it is now prohibited to export from the EU to third countries via Russia certain additional goods and technology which may contribute to Russia's military and technological enhancement or to the development of its defense and security sector, as well as goods and technology suited for use in aviation or space industry and jet fuel and fuel additives.
Additional import and export restrictions
As a further means of addressing circumvention of sanctions, Regulation 2023/1214 expands the export restrictions on dual-use and advanced technology items to 87 new legal entities which now include entities registered in China, Uzbekistan, the United Arab Emirates, Syria and Armenia.
Importantly, the sale, license, or transfer in any other way of intellectual property rights or trade secrets to export-restricted goods to a person, entity or body in Russia or for use in Russia has also been prohibited. The restriction is introduced to prevent sanctioned goods from being manufactured outside the EU.
Moreover, the restrictions on the import of sanctioned steel and iron products into the EU from third countries have been tightened. The third country must now prove that the inputs used to process the steel and iron products do not come from Russia.
Finally, the 11th sanctions package includes export restrictions on a number of new products and components, including electronic components and semiconductor materials and also introduces an amended structure of the industrial goods annex, by listing products subject to restrictions in one single section and with broader product definitions, to better identify goods subject to export bans and reduce circumvention of sanctions by misclassification.
Road transport and shipping measures
Regulation 2023/1214 increases the prohibition on the transport of goods by road in the EU. The restrictions now include trailers and semi-trailers registered in Russia, including when hauled by trucks registered outside of Russia. Vessels suspected of being in breach of the Russian oil import ban or G7 Coalition price cap are also prohibited from entering EU ports. Vessels that manipulate their navigation tracking system while transporting Russian oil, and vessels that fail to inform the competent national authority of a member state, will also be barred from entering EU ports.
New financial restrictions
Pursuant to the revised article 5f, it is now prohibited to sell transferable securities denominated in any currency, to any Russian national or natural person residing in Russia or any legal person, entity or body established in Russia.
With respect to securities denominated in the official currency of a Member State, the ban has been in place for all such securities issued after 12 April 2022. For securities denominated in any other currency, the prohibition will apply to securities issued after 6 August 2023 (or units in collective investment undertakings providing exposure to such securities)
Specific individuals and entities subject to asset freezes and other restrictions
Regulation 2023/12163 has added the following two banks operating out of the occupied territories to the list of entities subject to asset freeze:
- MRB Bank
- CMRBank
Further, over 100 additional individuals and entities have been made subject to asset freezes. This includes a number of business persons as well as Russian IT companies.
New reporting requirement
Pursuant to a new article 6b included in Regulation 833/2014, all natural and legal persons, entities and bodies will be required to (i) supply any information which would facilitate the implementation of the regulation to the competent authorities and (ii) cooperate with the competent authorities in any verification of such information.
This, seemingly, very broad reporting requirement is subject to the rules on confidentiality of communications between lawyers and their clients, in accordance with the Charter of Fundamental Rights of the European Union and, where applicable, without prejudice to rules regarding the confidentiality of information held by judicial authorities. The provision is new in the context of Regulation 833/2014.
Establishment of firewalls
The package also includes a new derogation that allows the provision of services required for the establishment of a firewall removing the control by a listed person over the assets of an EU entity.
Impact on Danish companies
The scope of applicable sanctions targeting Russia has again been extended and Danish companies should ensure that their sanctions compliance programmes, policies, screening processes and payment processes are updated to ensure that the newly enacted sanctions are appropriately addressed, including notably also risks of circumvention implying an even greater caution with respect to third country business partners.
In light of the enhanced export controls and new additions to the asset freeze lists, we recommend that Danish companies conduct re-screening of products and business partners.
Gorrissen Federspiel closely follows the developments of sanctions against Russia and we can assist with the interpretation of and compliance with the applicable sanctions, as well as implementation of measures to ensure that sanctions are observed.
Footnotes
1. Council Regulation (EU) 2023/1214 of 23 June 2023 amending Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia's actions destabilising the situation in Ukraine.
3. Council Regulation (EU) 2023/1216 of 23 June 2023 amending Regulation (EU) No 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
